Question

ABC Infinity is a CCPC with the following​ information:

Capital Dividend account balance on January 1 of the current​ year:$37,680

During the current​ year, the company had the following​ transactions:

Capital Gains of $9,000

Capital Dividends received of $4,000

Net Income for Tax Purposes of $88,000

​Non-Eligible Dividends paid of $19,500

What is the balance in the capital dividends account at the end of the current​ year?

Choose the correct answer.

A. $37,680

B. $26,680

C. $114,680

D. $46,180

Answer 1

Capital dividend account consist of

1. The excess of non taxable portion of capital gains over the non allowable portion of capital losses (Including business investment losses) incurred by the Corporation.
2. The aggregate of capital dividend received by the Corporation.
3. The non taxable portion of gains resulting from the disposition, in the period, of eligible capital property of each business of the corporation.

Less: Aggregate of all capital dividends that became payable by the corporation in the period.

Note: When a company generates a capital gain from the sale or disposition of an assets ,50%of the gain is subject to a capital gains tax. The non taxable portion of the total gain realized by the company is added to the capital dividend account.

Ans(d) Cash dividend account balance January 1^st,=$37680

Add: (50% of non taxable portion of the total gain)=$9000*50%=$4500

Add: Capital dividend received=$4000

Total balance of capital dividend account=($37680+$4500+$4000)=$46180